Online business loans – an alternative to bank finance

posted by: Jason Hulott

Businesses often need to borrow funds to grow, realign or simply maintain the level of working capital they need.

First, the bad news

But traditional lenders seem steadily less forthcoming with those loans to businesses. Unfortunately, therefore, in its report for 2017/2018, the British Business Bank found that 70% of small enterprises chose to sacrifice expansion rather than seek a business loan and only 43% of them were confident in getting a loan even if they applied for one.

But now the good news

The good news is that alternative sources of borrowing have filled the vacuum left by the withdrawal of traditional lenders – especially in the form of online business loans.

Thanks to streamlined, online application procedures, these alternative lenders offer a way of getting the funds you may need especially quickly and without much of the paperwork typically involved when applying to a bank.

Your online enquiry, for example, may be met with a more or less immediate decision in principle on the amount and repayment terms of your intended borrowing.

If this is followed up with a formal application, and this too is approved, the requested funds may be delivered to your company bank account within as little as 48 hours or so.

So, what is likely to be a sound approach to investigating online business loans?

Shopping around

you may notice that there are a number of sources to choose from – some may be balance sheet lenders (who advance their own funds, such as ourselves at Cubefunder), others might be crowdfunding platforms (peer to peer lenders who simply act as matchmakers between individual investors and businesses wanting to borrow), while still others may offer various forms of asset finance;

all are likely to adopt different approaches to assessing your application, offer different rates of interest, and display varying degrees of flexibility in the subsequent management and repayment of your loan;

Understanding the offer

rather than taking immediate action upon arriving at the website’s landing page, take a minute or two to understand the details of the lender’s services and the finer details of the business loans on offer;

ensure that the amount you want to borrow is available (typically, this ranges between £5,000 and £100,000) and that the repayment terms are sufficiently flexible to meet your needs – online business loans are usually short-term loans repayable between three and 12 months;

the cost of your credit is determined by the interest rates charged, of course, and for clarity’s sake, make sure that you understand that total cost from the word go – so that you can more easily budget the necessary repayments in terms of the demands on your company’s cash flow;

Transparency

just as any other financial institution, online lenders need to assess the affordability and creditworthiness of your company;

while online applications may avoid the need for detailed business plans and other paperwork, any lender still depends on your being entirely honest and transparent about your company’s financial status and performance;

borrowing online is about developing mutual trust between your company and the prospective lender – building it is more likely to ensure not only a successful application but also a more rewarding, understanding and flexible approach to the subsequent management of the loan and its repayment.

If yours is among the many companies wary of seeking finance from your bank, remember that alternatives exist in the form of online business loans.